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The Deal: Yahoo! Posts Tumblr For $1.1B in Mobile Growth Bid

Written by: The Deal05/20/13 - 11:44 AM EDT

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NEW YORK (TheDeal) -- Yahoo!, the Sunnyvale, California-based Web company undergoing a broad strategy shift under new CEO Marissa Mayer, will acquire New York startup Tumblr for $1.1 billion in cash in an ongoing attempt to establish its presence on smartphones.

Tumblr reportedly took in $13 million in revenue in 2012, and so far into 2013 has fallen short on its revenue goals of $100 million. The company raised about $125 million from venture capital investors from 2007 to 2011.

Thus far among 2013's acquisitions for Yahoo! are: Summly, a news application; Loki Studios, for mobile gaming; MileWise, an app for travelers; Astrid, a to-do list organizer; and GoPollGo, a social polling tool.

The latest social media deal is not unlike Facebook's $1 billion pre-initial public offering grab of nascent startup Instagram in 2012, which the social network bought in order to continue its trajectory onto smartphones after years of dominance on desktop hardware.

Still, Yahoo! has had difficulty absorbing some of its startups in the past. Perhaps its most notable deal that soured, from 1999, is a $3.6 billion buy of GeoCities, which it would shut down a decade later.

But sources said that under Mayer, the company's reputation has improved and Yahoo! has increasingly been seen as a viable Silicon Valley technology company on the rebound.

Yahoo! even seemed to acknowledge its rocky M&A past when, in its statement earlier Monday, it said: "Per the agreement and our promise not to screw it up, Tumblr will be independently operated as a separate business. David Karp will remain CEO."

Karp is Tumblr's founder, who, as a teen and high school dropout, developed the company in 2007.